Seeking Alpha in Startups + Fundraising Fieldnotes - 10.29.21

Hey - it’s Jason Yeh 🕺🏻

This is my Friday recap of thoughts I’ve had while helping founders solve their fundraising challenges this past week (10.29.21)

If you have any questions, please reply! I try to get to every comment/question I get :)

On to the Fieldnotes for 10.29.21…

Seeking Alpha in Startups (What is your unique insight?)

It’s an amazing time to be a content consumer. Streaming services like Netflix and HBO and mobile video apps like TikTok and Instagram have created a wondrous world. Now my super-specific interests in foreign language food shows, behind-the-scenes sports documentaries, cute pitbull videos, montages of slightly above average longboard surfers, and short dance clips are perfectly met with endless options.

The same is true for consumers of products and services in general. In the world of cloud computing, plug and play infrastructure, no-code tools, democratized design, drop shipping, wholesale marketplaces, talent contracting, and every other innovation that has made launching digital and physical products SO easy, it feels like there is a product to address every inconvenience or need, no matter how small, in my personal and professional life.

When I launched my podcast Funded in the middle of the 2020 pandemic, I struggled through a piecemeal solution of  Zoom, Garageband, Dropbox, and a few other tools in order to record interviews and produce episodes in a remote world. A few months later, Riverside.fm launched and greatly simplified the way I conducted remote podcast interviews.

When I onboarded my first virtual assistant and began offloading tasks to her earlier this year, I would manually create SOPs to outline the most mundane jobs. That meant taking screenshots, drawing arrows and boxes to highlight steps, saving the new images in a document, and adding text instructions. It was the worst time suck ever that I suffered through...until I found Tango! A chrome plugin that automatically captures your actions and creates an incredible SOP with screenshots for you.

Even my IRL frustrations are not long for this world. When I got my dog Lola last year, I complained about holding her leash while struggling to post selfies on Instagram at the same time. Enter the startup Zee Dog and their hands-free leash. Lifesaver!

The point is we live in a world where demand is met with supply almost immediately. If someone THINKS it, IT can almost certainly be built (see Neuralink 🤯). The market for products, services, and software has become an efficient market. In other words, all opportunities / solutions are transmitted perfectly, completely, instantly, and for no extra cost to the consumer.

Efficient Markets and Alpha

When people think of “efficient markets”, the first that comes to mind is public investing markets. Because information used in the public markets should be transmitted perfectly, completely, instantly and for no extra cost, the prices you see there are meant to perfectly represent the long-term value of the company inclusive of plans for future growth. Theoretically, that means there is no predictable way to make excess return, or “alpha,” while investing in the public markets. 

Of course, that doesn’t stop professional traders from confidently pursuing strategies that they believe will (and sometimes do) produce alpha.

So...alpha is what?

If the concept of generating alpha in an efficient market doesn’t make sense right away, consider this  analogy. 

Think about efficient markets as a special F1 car race.  It might be a stretch, but I’m counting on the popularity of  Drive to Survive on Netflix for this to land. Anyway, in this particular race, no one has an advantage because everyone is driving the exact same car and all the drivers have gone through the exact same training. It’s impossible to guess who will win. In this case, alpha is generated when a driver somehow generates an edge. Maybe they think they know something about the road conditions that other drivers don’t or they thought of a new driving tactic on their own or maybe they have a screw loose and will drive more aggressively. When a driver can differentiate from the pack to gain an advantage, that is when there is an opportunity to predictably win the race (i.e. generate excess returns or alpha)

Alpha for Startups - What and How?

There is an analogous dynamic in startup investing and fundraising… (continue reading…)

Super helpful data if you’re raising😳

This founder doesn’t have a ton of experience, but he got a lot right here!

Till next week. Stay adamant and be chased.

Jason

p.s. DYK avocado seeds are a common source of pink dye for clothing? Strange but true!

Small asks!

If you thought this was helpful or enjoyable in anyway, I’d love for you to:

• Forward this newsletter with others who would enjoy it

• Follow me on Twitter where I’ve begun building in public (my course, my podcast, etc)!

• Listen with a friend to Funded, my podcast that tells the rollercoaster stories of how founders raised millions (and subscribe🙏)

• Ask me your fundraising questions so I can help you and cover them in a future issue